Moving step-by-step through an actual deal using a high- volume business model Property: 3BR/2BA, 1,500 SF house that needs $5-9K in paint/carpet/cleaning Debt: $200,000 loan balance, one mortgage Value: Comps between $140-190K in past six months, estimated $150K sale price 1. Realtor gets short sale lead. Figures out that the house has no equity, is in the right area and the seller has a legitimate hardship. Time to call the Investor. 2. Realtor emails investor’s assistant and asks her to email back the short sale Package 3. Realtor receives package and goes out to meet with the Sellers. She explains to them how the process works and that she does short sales with the Investor because he gets the process started with A TOP NEGOTIATING FIRM with the Bank right away by putting the house under contract for sale and purchase. They won’t have to wait weeks for an offer to send to the bank while the Bank inches closer to a foreclosure sale. 4. Realtor gets the Sellers to sign the short sale paperwork and collects all of the necessary financial info for an offer to send to the bank while the Bank inches closer to a foreclosure sale. 5. Realtor makes a copy of the package for her broker’s file and gives all original documents to Investor’s assistant. 6. Assistant scans package for Investor’s negotiating company, but at this point we will know what will be offered and where to list the property initially knowing that we will lower it in 3-4 months. 7. Assistant emails our real estate agent with instruction to prepare a conservative BPO along with an estimate of repairs and pictures of the house. 8. Realtor puts the property on MLS right away at a higher price than the sweet spot range at $169K. Three to four months later, Realtor begins lowering list price into sweet spot range. . She has gotten Seller authorization to automatically reduce the price to $150K if there are no calls or action within 90 days. 9. Realtor completes his report and emails it to the Assistant to be passed on to the negotiating team. Negotiator now has picture of the house, a completed BPO and an estimate of repairs. The “quick sale, as-is” BPO comes in at $135K. 10. Realtor emails the Assistant to put together a proposed HUD-1 for the Bank indicating a $100K purchase price with a 6% Realtor commission, 6% in seller commissions and a 1% negotiation fee. All doc stamps, title fees, prorated items and usual & customary costs of sale appear on the seller side, so the Bank nets around $82,000. The seller receives $0. 11. The Assistant puts the HUD-1 together and emails it to the negotiator, who is now authorized by the Seller to deal with the Bank on the account because the Bank has received a signed Authorization to Release form. 12. The BPO Agent looks at the Realtor’s version of a BPO and agrees with the $135K value. No calls or showings at this point. We instruct the listing agent to lower the price to $150K if there are no calls after 90 days. 13. The Negotiator has submitted the entire short sale package to the Bank and is waiting for it to be assigned to a loss mitigator and for the Bank to order its BPO. 14. Now 30 days go by. The Negotiator has made follow-up calls twice a week. The Realtor has seen some action on the house but no offers, most likely because it is a short sale. The market has taken a slight drop because it is a short sale and no one wants to wait around. The market has taken a light drop because two REO’s (bank owned properties) down the street just sold for $135K and $145K. 15. The loss mitigator tells the Investor’s negotiator that a BPO has been ordered. The negotiator emails the Investor and tells him to get ready with the Realtor and contractor. 16. The Realtor updates their BPO to reflect today’s market conditions. With the new comps and the increased inventory, the updated BPO comes in at $130K (“quick sale, as-is”). We instruct the listing Realtor to lower the price to $145K. 17. The Bank’s BPO agent calls the Negotiator, who puts her touch with the Investor’s Realtor and contractor, who schedules the inspection for the following day. 18. The next day at the house the investor, Realtor and contractor takes a list of the repairs, our BPO and a cover letter explaining the situations to date. The Realtor states that they’ve sent a $100K offer to Bank, which they realize it is a bit low, but that they have had no success in getting a higher offer. The house has been on the market for 60 days, currently listed at $145K with no takers. The investor’s Realtor shows the Bank’s agent his $130K BPO and explains the comps, repairs and market conditions that led him to that valuation. He gladly shares a copy of his BPO with the Bank’s agent. The contractor is introduced and he gives the banks agent his list of repairs 19. The Realtor calls the Bank’s agent the next day to ask if the report is done and what it came in at. The “only reason he wants to know” is so they can make sure the house is priced correctly, because he isn’t so sure the $100K offer is going to fly. The Bank’s agent says she can’t tell him exactly what is came in at, but “hints” that the number was only about $5K off. The Realtor now knows the Bank’s value is around $135K and the banks margin is right about 105K 20. The Realtor explains to the investor what has transpired. The Realtor is really starting to get a lot of calls on house. The Realtor advises that it would be much easier to sell if a few hundred dollars could be spent on debris removal, lawn maintenance, and a maid to scrub down the interior. The investor fronts the money and it is all done. 21. Another two weeks go by when the Negotiator gets a call from the Bank advising that the offer is too low and the needs to be closer to $135K. The Bank also says it will only pay 5% commission and will not pay a negotiating fee. Also, they are not sure if they could do the requested concession or not and would have to get that approved by their Wall Street investor. In response, the Negotiator raises the offer to a $125K purchase price, throws out the negotiating fee, and reduces the commission to 5% but keeps the concession the same, as well as all normal fees and prorations. The net offer to the Bank is now at $105K (just under 80% of the BPO) and appears to have a good chance of going through. 22. The investor instructs the Realtor to place the following into the MLS remarks: “Short Sale Verbally Approved. Listing agent has received verbal short sale approval and just needs full price offer to move forward.” Now the Realtor’s phone is ringing. Although there are cheaper houses down the street priced at $135K and $145K, they are also short sales and those list prices are not approved because the listing agents on those houses A) have done nothing with the Bank and B)have no signed offers 23. Another week goes by. The Bank’s loss mitigator says everything looks good, except his boss will only approve a 3% concession. The Negotiator says he thinks he can make that work and tells the loss mitigator to go ahead and submit that for approval. The net offer to the Bank is now right around $109K. 24. The Realtor receives two offers on the house. The first is for $155K, but the buyer wants 6% in seller concessions and is getting FHA financing. The second offer is for $135K. The buyers are putting down 20% and have a good relationship with their Bank. The investor instructs the Realtor to counter the $135K offer at $140K. 25. The property goes under contract for $140K with a closing date set for month end. However, the contract states that the Seller can extend the closing date an additional 30 days (to protect himself in the event the Bank drags its feet on the approval letter.) We have a Buyer! 26. Once the payoff demand approval letter is in the hand the Investor tells the Realtor to inform the Buyer’s agent to go ahead and order the appraisal and inspections, and plan on closing at the end of the month. Investor instructs his title company or real estate attorney to prepare as necessary. 27. Another two weeks go by, the end Buyer’s appraisal and inspections are done and the Negotiator has a written short sale acceptance. The approval letter is good for 30 days and the Buyer can close in two weeks because everything is just about done. 28. The A-B transaction closes on the 14th and the B-C transaction closes on the 15th. The Investor’s net on the B-C sale is around $133K after closing costs, 3% to buyers agent and prorated taxes, for a net profit (on the entire short sale and subsequent re-sale) of $20K.
Pages to are hidden for
"Sample short sale.docx"Please download to view full document